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Industry 4.0, EU strategy and investment by the best in Italian manufacturing

The EU’s plan to stimulate manufacturing is reiterated in a document, published last week in Brussels, which contains the strategic guidelines of the newly appointed EU commission under Jean-Claude Juncker and centres around two pillars: greater attractiveness of Europe for international resources (and so a strengthening of competitiveness) and a series of massive investments in the “digital economy” and in bringing together the knowledge economy, communications, culture and the medium and high-tech industries. This is an ambitious strategy that moves in the direction of the commitment already undertaken by the EU to raise the contribution of manufacturing to 20% of GDP (from the current 15.1%) by 2020.

In other words, we are moving ever closer to an industrial compact, and the Italian presidency of the European semester will further strengthen this strategy. “Enough with ‘turbo-finance’. Now let’s get back to the real economy,” said Italian Prime Minister Matteo Renzi in a recent interview with Il Messaggero (23 June) in which he reiterated the thoughts of Romano Prodi and spoke explicitly of “industrial policy” (a strategy that brought an end public investment in “cathedrals in the desert”, great petrochemical facilities and steelworks, and subsidised businesses to focus – much more appropriately – on promoting conditions that would favour private investment both domestically and internationally).
Italy can start from a strong position when embarking upon the road towards the industrial compact, given that it is Europe’s second leading manufacturer with manufacturing at a level of 16.5% of GDP. If we look even deeper, we see, in addition to the average figures, that the level in northern Italy is 21.6% and that the 20% target has even been exceeded in the Marche and Abruzzo regions and in as many as 37 Italian provinces.
The crisis has yet to release its grip, but industry is holding its own (and the ISTAT confidence index rose from 86.9 in May to 88.4 for June and improved across all industries, with manufacturing rising to 100, the highest it has been since July 2011), and even respected economists have confirmed what we have always said here on this blog, that there can be no future without manufacturing. This knowledge is also shared by the Italian Minister for Economic Development, Federica Guidi, who is putting together a plan for Italian manufacturing that features 100 million in investment and initiatives to strengthen exports (adding 50 billion to the current 470 billion) and to attract at least 20 billion in international investment for a decisive turnaround in both competitiveness and development.

We could go even further, looking at the medium-term strategy, and follow the advice of Roland Berger, a major German advisory firm, contained in a recent document entitled Industry 4.0, “a sort of manifesto on industrialism in the era of smart manufacturing” (as astutely summed up by Paolo Bricco in Il Sole24Ore on 27 May). And what does Berger have to say? Over the last twenty years, global value added in manufacturing has gone from 3.5 to 6.5 trillion euros. Twenty years ago, Europe, the US and Japan accounted for 79% (with Europe at 36%), but now they control just 60% as a result of a major process of deindustrialisation and illusions that growth depended on finance and on high-tech services.

Now, though, we have come to our senses, having been wounded by the Great Crisis of turbo-finance, and we have begun to focus on the real economy, giving rise to vibrant trends in reindustrialisation and backshoring, i.e. the return of manufacturing to the countries with the longest history of industrialisation. Despite it all, Germany has remained a great manufacturing nation, with Italy in second place, but as Roland Berger reports, “No individual nation, including Germany, can fully transform its industrial system without a European industrial policy agenda.” This is why we must make decisive strides towards the EU industrial compact and give substance to moves towards reaching the target of manufacturing at 20% of GDP by 2020: 90 billion in investment per year and, looking ever farther into the future, a total of 1.5 trillion by 2013.
And in Italy? We will need 15 billion in investment per year in the medium and high-tech segments, where we can boast cases of manufacturing excellence, but there is still room for improvement, as well as policy regarding digital infrastructures (and extending the availability of broadband), training and development, research, bringing businesses together, the widespread digitalisation of public administration, and so on. “Industrial models need to be completely transformed,” said Roberto Crapelli, managing director of Roland Berger Italia, “in a paradigm shift comparable to that of the 1980s and the introduction of automation and robotics in Italian industry.” As summed up by Il Sole24Ore, it will take strategy in which networked factories all organise around technology and in which the connective tissue between businesses changes, not to mention product innovation and “ultra-tertiarised” manufacturing. In other words, “Industry 4.0”.